THIS ESCROW
AGREEMENT (this “ Agreement ”), dated as
of August 9, 2005 (the “ Effective Time
”), is by and among Zix Corporation, a Texas corporation (the
“ Company ”), and JPMorgan Chase Bank,
N.A., a national banking association, as escrow agent hereunder
(the “ Escrow Agent ”).
The Company
presently intends to raise capital in a private offering of its
securities (the “ Offering ”) pursuant to
that certain Securities Purchase Agreement, dated of even date
herewith (the “ Securities Purchase Agreement
”), by and among the Company and each of the purchasers
listed on Schedule A thereto (collectively, the “
Purchasers ”). As required by the Securities
Purchase Agreement, the proceeds with respect to the Excess Units,
as such term is defined in the Securities Purchase Agreement, and
identified on Schedule A to the Securities Purchase
Agreement and Schedule A hereto as the “Excess
Funds” are to be placed in escrow hereunder with the Escrow
Agent (the “ Escrow Funds ”). The Escrow
Agent is willing to hold and administer such Escrow Funds and any
income thereon and additions thereto, and to pay and distribute the
amounts held by it in accordance with the terms of this
Agreement.
NOW, THEREFORE, in
consideration of the mutual covenants and agreements contained
herein, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties agree
as follows:
ARTICLE I
ESTABLISHMENT OF ESCROW
Section 1.1 Escrow Funds . Contemporaneously
with the Company’s receipt of the proceeds of the Offering,
the Company shall immediately deposit, or arrange for the immediate
deposit of, the Escrow Funds with the Escrow Agent. From and after
receipt of the Escrow Funds by the Escrow Agent, the Escrow Agent
will hold and disburse the Escrow Funds (together with any cash or
other property received in respect thereof or earned thereon, which
shall become a part of the Escrow Funds) only in accordance with
the provisions of this Agreement. Prior to the release and
distribution of the Escrow Funds, the Escrow Agent shall hold the
Escrow Funds for the benefit of the Company and the Purchasers
pursuant to the terms of this Agreement.
Section 1.2 Investments . The Escrow Agent shall
invest and reinvest the Escrow Funds and any other cash received by
the Escrow Agent with respect thereto in such Eligible Investments
as the Company designates in writing to the Escrow Agent and shall
not be responsible or liable for any loss, tax or other charge
accruing from any investment made in accordance herewith. The
“ Eligible Investments ” shall be those
investments set forth in Schedule B attached hereto.
All earnings received from the investment of the Escrow Funds (the
“ Investment Earnings ”) shall be
credited to, and shall become a part of, the Escrow Funds (and any
losses on such investments shall be
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debited from
the Escrow Funds). Unless otherwise directed in writing, the Escrow
Funds shall be invested and reinvested in the JPMorgan Chase Cash
Escrow. The Escrow Agent or any of its affiliates may receive
compensation with respect to any investment directed
hereunder.
Section 1.3 Additional Interest . In accordance
with Section 1(b)(ii) of the Securities Purchase
Agreement, while held by the Escrow Agent, the Escrow Funds shall
accrue interest from and including the day following the Closing
Date (as defined in the Securities Purchase Agreement) to and
excluding the date of release at a rate of 7.0% per annum (computed
on the basis of a 365-day year) (the “ Interest
Amount ”). If the Escrow Funds are released to the
Company pursuant to Section 2.2(a) , the Company shall
promptly pay the Interest Amount to the Purchasers. If the Escrow
Funds are released to the Purchasers pursuant to Section
2.2(b) , to the extent the Investment Earnings are less than
the Interest Amount, the Company shall promptly pay to the
Purchasers the amount, if any, equal to such shortfall.
ARTICLE II
TERM; RELEASE OF ESCROW FUNDS
Section 2.1 Term . The term of this Agreement
shall commence at the Effective Time and shall terminate at such
time as all Escrow Funds have been distributed pursuant to the
terms of this Agreement.
Section 2.2 Release of Escrow Funds . The Escrow
Agent shall release and distribute the Escrow Funds (including any
Investment Earnings) as follows:
(a) to the
Company, upon the Escrow Agent’s receipt of a certificate
substantially in the form of Exhibit A , executed by a
duly authorized officer of the Company and certifying to the Escrow
Agent that the Shareholder Approval contemplated by Section
5(d) of the Securities Purchase Agreement has been obtained on
or before 5:00 P.M. CST, Houston, Texas time, on November 22,
2005.
(b) to the
Purchasers, upon the Escrow Agent’s receipt from the Company
of a certificate substantially in the form of Exhibit A
, executed by a duly authorized officer of the Company and
certifying to the Escrow Agent that the Shareholder Approval
contemplated by Section 5(d) of the Purchase Agreement
was not obtained on or before 5:00 P.M. CST, Houston, Texas time,
on November 22, 2005, with each Purchaser to receive a portion
of the Escrow Funds equal to the sum of:
(i) the amount of
funds set forth next to its name on Schedule A attached
hereto under the column entitled “Excess Funds”;
and
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(ii) such
Purchaser’s pro rata share, based upon such Purchaser’s
Excess Funds vis-a-vis other Purchasers, of any Investment Earnings
accrued on the Escrow Funds while held by the Escrow
Agent.
If the Shareholder
Approval contemplated by Section 5(d) of the Securities
Purchase Agreement is not obtained and the Company does not deliver
a certificate to the Escrow Agent pursuant to this
Section 2.2(b) within 2 business days following
November 22, 2005, the Escrow Agent shall deliver the Escrow
Funds, including any earnings accrued on the Escrow Funds, to the
Purchasers at the address or accounts, as applicable, provided on
Schedule A .
The Escrow Agent
shall promptly (and in any event within two business days from
receipt of notice) release and distribute the Escrow Funds (and any
earnings accrued thereon), as described above, in accordance with
the payment instructions provided by an executed certificate
substantially in the form of Exhibit A provided to the
Escrow Agent by the Company.
Section 2.3 Effect of Final Delivery . This
Agreement shall continue in full force and effect until the Escrow
Agent has delivered all of the Escrow Funds pursuant to the terms
hereof. Except as set forth in Section 4.12 , after all
of such funds have been so delivered, all rights, duties and
obligations of the respective parties hereunder shall
terminate.
ARTICLE III
THE ESCROW AGENT
Section 3.1 Appointment . The Company hereby
designates and appoints the Escrow Agent as “Escrow
Agent” under this Agreement, and the Escrow Agent hereby
accepts such designation and appointment, subject to all of the
provisions of this Agreement.
Section 3.2 Compensation; Expenses
Reimbursement .
(a) The Company
agrees to pay the Escrow Agent’s compensation for its normal
services hereunder in accordance with the executed fee proposal, by
and between the Escrow Agent and the Company, which may be subject
to change as mutually agreed upon from time to time between the
Company and the Escrow Agent.
(b) The Company
agrees to reimburse the Escrow Agent on demand for all costs and
expenses incurred in connection with the administration of this
Agreement or the escrow created hereby or the performance or
observance of its duties hereunder which are in excess of its
compensation for normal services hereunder, including payment of
any reasonable legal fees and expenses incurred by the Escrow Agent
in connection with resolution of any claim by any party
hereunder.
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Section 3.3 Escrow Agent Terms and
Conditions .
(a) The
duties, responsibilities and obligations of the Escrow Agent shall
be limited to those expressly set forth herein, and no duties,
responsibilities or obligations shall be inferred or implied. The
Escrow Agent, in its capacity as such, shall not be subject to, nor
required to comply with, any other agreement to which the Company
is a party, even though reference thereto may be made herein, or to
comply with any direction or instruction (other than those
contained herein or delivered in accordance with this Agreement)
from the Company or any entity acting on its behalf. The Escrow
Agent shall not be required to, and shall not, expend or risk any
of its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder.
(b) If at any
time the Escrow Agent is served with any judicial or administrative
order, judgment, decree, writ or other form of judicial or
administrative process which in any way affects the Escrow Funds
(including but not limited to orders of attachment or garnishment
or other forms of levies or injunctions or stays relating to the
transfer of the Escrow Funds), the Escrow Agent is authorized to
comply therewith in any manner as it or legal counsel of its own
choosing deems appropriate; and if the Escrow Agent complies with
any such judicial or administrative order, judgment, decree, writ
or other form of judicial or administrative process, the Escrow
Agent shall not be liable to any of the parties hereto or to any
other person or entity even though such order, judgment, decree,
writ or process may be subsequently modified or vacated or
otherwise determined to have been without legal force or
effect.
(c) (i) The
Escrow Agent shall not be liable for any action taken or omitted,
or for any loss or injury resulting from its actions or its
performance or lack of performance of its duties hereunder in the
absence of gross negligence or willful misconduct on its part. In
no event shall the Escrow Agent be liable (A) for acting in
accordance with or relying upon any instruction, notice, demand,
certificate or document from the Company or any entity acting on
behalf of the Company, to the extent such reliance is contemplated
by this Agreement, (B) in no event shall the Escrow Agent be
liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even
if the Escrow Agent has been advised of the likelihood of such loss
or damage and regardless of the form of action, (C) for the
acts or omissions of its nominees, correspondents, designees,
subagents or subcustodians selected with reasonable care, or (D)
for an amount in excess of the value of the Escrow
Funds.
(ii) If
any fees, expenses or costs incurred by, or any obligations owed
to, the Escrow Agent hereunder are not promptly paid when due, the
Escrow Agent may reimburse itself therefor from the Escrow Funds.
In such event, the Escrow Agent shall notify the Company of any
such reimbursement from the Escrow Funds and shall furnish to the
Company copies
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of all related
invoices and other statements, and the Company shall promptly
restore any amount deducted from the Escrow Funds.
(iii) The
Escrow Agent may consult with legal counsel of its own selection at
the expense of the Company as to any matter relating to this
Agreement, and the Escrow Agent shall not incur any liability in
acting in good faith in accordance with any advice from such
counsel.
(iv) The
Escrow Agent shall not incur any liability for not performing any
act or fulfilling any duty, obligation or responsibility hereunder
by reason of any occurrence beyond the control of the Escrow Agent
(including, but not limited to, any act or provision of any present
or future law or regulation or governmental authority, any act of
God or war, or the unavailability of the Federal Reserve Bank wire
or telex or other wire or communication facility).
(d) The
Escrow Agent shall provide the Company wit
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